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Impact Analysis of Summer Onion in Bangladesh

M.K. Hasan
Principal Scientific Officer
Agricultural Economics Division, BARI, Gazipur

M.A.M. Miah
Senior Scientific Officer
Agricultural Economics Division, BARI, Gazipur

Abstract/ Executive Summary:

This study was conducted to quantify the returns to investment on research and extension of summer onion. Economic surplus model with ex-post analysis was used to estimate the returns to investment and their distribution between the production and consumption in Bangladesh. The growth rates of area and production have increased dramatically after the release of summer onion variety. But the growth rate of yield was negative. Several discounting technique were used to assess the efficiency of summer onion research. The internal rate of return (IRR) to investment was calculated at 25. During 2007-08 about 0.39 percent more production of summer onion made available because of farmers adoption. The yield of summer onion was found to be 57.04% higher over local varieties. The benefit cost ratio of the program was estimated to 3.09. Due to inelastic demand, all the benefits of the programme passed on the consumer estimated by consumer surplus, where as the producer surplus were negative. Under various assumptions about the research and extension expenditure, the IRR ranged from 20 to 41 percent and benefit cost ratio from 2.31 to 5.95. The funding of summer onion variety research and extension is a good investment.

Keywords: Impact analysis, Summer onion, Adoption, Bangladesh

Location: Spices Research Center, BARI, Shibganj, Bogra

Start Date: 01-04-2008

End Date: 31-10-2008

Program Area: Socio-economic and Policy

Non-commodity: Adoption of technology

Objectives:

i)To find the growth rate of area, production and yield of summer onion

ii) To find the adoption of summer onion and its yield advantages over local varieties

iii) To estimate the rate of returns of summer onion research and extension.

Methodology:

The economic surplus model with ex-post analysis was considered for the present study to estimate the rate of returns of summer onion. The study was attempted with the closed-economy. The closed-economy commodity market is defined as a commodity that is totally produced and consumed domestically and is neither imported nor exported. Economic surplus model: The concept of economic surplus has been used to measure economic welfare and the changes in economic welfare from policy and other interventions.The total social benefits to society from the adoption of an intervention is the summation of the change in consumer surplus plus the change in producer surplus (Area abc + Area Oac) minus the input cost change from adopting the new interventions. Change in Consumer Surplus = Area abc + Area PnbaPo Change in Producer Surplus = Area Oac-Area PnbaPo Change in Total Economic Surplus = Area abc+ Area Oac Empirical Approach: The Akino and Hayami (1975) approximation formulas for calculating changes to producer and consumer economic surplus are described below and these are used in this study. The Akino and Hayami (1975) approximation formulas for calculating the change in economic surplus for a closed –economy analysis Area A (abc) = 0.5 PoQo ((k(1+ γ))2/( γ +η)) (1) Area B (Oac) = kPoQo (2) Area C (PnbaPo) = (PoQok (1+ γ))/( γ + η)) x (1-((0.5k(1+ γ) η)/( γ + η))-0.5k (1+ γ) (3) Market related data and information: Onion production and harvest prices were used in the analysis. For the analysis, onion prices were converted to 2007-08 constant prices. Period covered: The study was undertaken during 2007-08. The study period covered from 1995-96 to 2007-08. The benefits were considered from 2000-01, the year when summer variety of onion was adopted and sown by the farmers.

Source of Information: Research Report, 2009. Spices Research Center, BARI, Shibganj, Bogra.

Article Link (Online Journal):

Funding Source:

1. Government

Budget: 30,000/-

Total Budget (Tk.) : 30,000/-

Achievement/Findings:

The growth rates of area and production have increased dramatically after the release of summer onion variety. But the growth rate of yield was negative. Several discounting technique were used to assess the efficiency of summer onion research. The internal rate of return (IRR) to investment was calculated at 25. During 2007-08 about 0.39 percent more production of summer onion made available because of farmers adoption. The yield of summer onion was found to be 57.04% higher over local varieties. The benefit cost ratio of the programme was estimated to 3.09. Due to inelastic demand, all the benefits of the programme passed on the consumer estimated by consumer surplus, where as the producer surplus were negative. Sensitivity analysis reveals that under various assumptions about the research and extension expenditure, the IRR ranged from 20 to 41 percent and benefit cost ratio from 2.31 to 5.95. The results indicated that, the funding of summer onion variety research and extension is a good investment.A sensitivity analysis was undertaken in the study. The base parameters included IRR 25 percent, NPV 35.29 million taka and BCR 3.09. When the yearly supply shifter k was decreased by 25 percent, there was a decrease in the rate of return to 20 percent, BCR 2.31 (Table 6). When the supply shifter k was increased by 25 percent, the IRR increased to 30 percent and BCR 3.86. When the expenditure decreased by 25 percent, the IRR increased to 36 percent and BCR increased to 4.76. When the expenditures were increased by 25 percent, the IRR decreased to 26 percent and BCR 2.86. A simultaneous increase of 25 percent in the supply sifter and 25 percent decrease in expenditures gave rise to 41 percent IRR with BCR 5.95.

Knowledge Management: Report/Proceedings